Argentina and Paraguay reach truce in waterway dispute

Mercosur countries have agreed to a 60-day negotiation phase over controversial tolls

One of the longest waterways on the planet crosses South America in a zigzagging line 3681 kilometers long. The Paraná-Paraguay hidrovía (waterway) system, as it is officially known, begins in Puerto Cáceres, Brazil, passes through Bolivia and Paraguay, and ends in the Río de la Plata, shared by Argentina and Uruguay. From end to end, it is longer than the US-Mexico border.

The waterway isn’t just important because of its length. It is also one of landlocked Paraguay’s main ways of reaching international trade routes, and is used to ship 80% of Argentina’s exports. 

When Argentina began to charge a toll on a stretch of the waterway at the start of the year, it generated unprecedented levels of tension in a region unaccustomed to differences. Paraguay rejected the imposition of the toll, arguing that it violated the common legislation of the waterway and impeded free circulation on the rivers. Argentina defended the charge, claiming that it had carried out maintenance work and that it had the right to impose the fees, according to the same laws that Paraguay cited to reject it.

On Wednesday, after more than a month at loggerheads and two days of negotiations at the Brazilian embassy in Buenos Aires, the parties reached a truce. Sources from the Argentine and Paraguayan foreign ministries told the Herald that the agreement should ease the tensions between the two countries.  

The agreement bears the signatures of senior foreign ministry officials from Brazil, Argentina, Bolivia, Paraguay and Uruguay. The countries agreed that toll collection will not be suspended, but Argentina will not go to court over late payments for the next 60 days. During that time, they have agreed to set up a technical committee to analyze the toll rate.

The history of the toll

The story of the toll began in November 2022. Argentina’s General Ports Administration called a public hearing that month to define the rate of a toll from Confluencia (where the Paraguay and Paraná rivers meet, in northern Argentina) to Santa Fe, in the central part of the country.  

The Argentine technicians argued that the country had invested US$22 million in beaconing and dredging works over the course of a year. Divided by the traffic navigating the waterway, they said, that made for a toll of US$1.47 per tonne for international traffic (regardless of the ship’s flag) and AR$1.47 per tonne (US$0.004 at the official rate and US$0.002 at the MEP dollar rate) for Argentine traffic.

Paraguayan attendees rejected the move.

The toll came into force on January 1, 2023. In February, Argentina started to invoice logistics companies, mainly from Paraguay and in dollars. An Argentine official told the Herald that the average toll cost per ship was between US$2,000 and US$3,000, depending on its transport capacity. This was equivalent to around 1% of the total transport cost. 

The first spat was in May. When a Paraguayan company didn’t pay the toll, the Argentine judiciary ordered the detention of a barge. Before that, other less aggressive instances had been exhausted, such as the sending of e-mails and legal notices, according to official Argentine sources. Two days after it was detained, and after the payment of around US$90,000 of accumulated debt, the Paraguayan barge was allowed to continue its voyage. 

Meanwhile, Paraguay held elections on April 30. Santiago Peña was elected president, taking office on August 15.

Tension on the rise

Tensions were ratcheted up to 11 after Argentine Economy Minister Sergio Massa’s visit to Asunción in late August. After the meeting, Argentine and Paraguayan officials told the Herald in Asunción that they had agreed to form a “high-level” commission to consider the establishment of a single toll for the entire waterway, in order to finance maintenance work. None of those present at the meeting expressed disagreement. 

However, the story changed just a few hours after the Argentine delegation landed in Buenos Aires. Argentina and Paraguay’s versions of events were now completely opposed. 

That day, the Argentine Ministry of Transport published on X (formerly known as Twitter), that there would be a “high-level meeting” to “analyze the works carried out and evaluate the cooperation between the parties,” although it clarified that this would happen “without suspension of the temporary collection of the toll.”

The Paraguayan Foreign Ministry replied on X almost three hours later: “We received with surprise and displeasure the announcement of the Ministry of Transport of Argentina that it will maintain the toll charge on the Paraguay-Parana Waterway; after Ministers Sergio Massa and Diego Giuliano, in a meeting with President Peña in Asuncion, agreed to lift the measure.”

How could the dispute escalate so significantly over a technical discussion about the legality of a toll that has no significant impact on logistics costs? 

Argentine officials told the Herald that they found Paraguay’s position “incomprehensible,” suggesting that the Peña administration could be political motivated because of domestic policy debates.

Paraguayan government officials and businessmen alike accuse the Argentine government of lying when it left the meeting. José Luis Salomón, general manager of the Paraguayan American Chamber of Commerce, told the Herald that the toll charge is “illegal” because Argentina imposed it “unilaterally”, but said he was confident that the “brotherly” countries would ultimately reach an agreement.  

Far from remaining a bilateral issue between Argentina and Paraguay, the conflict spread across the region. On September 11, a joint communiqué from Bolivia, Paraguay, Brazil and Uruguay expressed the displeasure of the four countries’ governments with Argentina’s decision. 

From that point, tensions continued to escalate. Paraguay decided to open the floodgates of the binational Yacyretá dam without consulting Argentina, affecting its generation capacity and reducing the power sent to Argentina. It subsequently chose to keep all of the dam’s generated power, further limiting Argentina’s power supply.

Argentina continued to apply tolls and issue invoices. With tensions at a peak, Argentine Customs retained fuel trucks at the Paraguayan border, accusing them of under-invoicing their cargo. 

The situation reached such unprecedented levels that Paraguayan Congressman Rubén Rubín even said in Congress that he would “go to war” against Argentina, although he later apologized.

Request for U.S. government intervention

During the days of highest strain, a mix-up added even more anxiety to the situation. Argentine media outlets reported that AmCham Paraguay had asked the US government to intervene in the conflict. In fact, this was not the case. 

It was actually the leadership of the “Paraguayan American Chamber of Commerce, Inc. — USA”, a U.S. trade association based in Miami, that asked the Biden administration’s Commerce Secretariat to step in. The president, Martin D. Cardozo, told the Herald that the organization has no relationship with the Paraguayan AmCham, but that as U.S. citizens they demanded their government quantify the effect this measure causes to the trade between the USA and Paraguay (and the other affected countries), and if it is appropriate to help find an immediate solution.

“We received messages from members complaining about this situation and decided to ask our government to quantify the damages,” said Cardozo. 

The U.S. Embassy in Paraguay expressed its appreciation for having been informed and added that it is following the situation closely.

Updated to add response of U.S. Embassy in Paraguay 16:01


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